Monetary Policy and Bank Profitability in a Low Interest Rate Environment: A Follow-up and a Rejoinder

Charles Goodhart and Ali Kabiri

No 13752, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: There is a debate about the effect of the extremely low, or even negative, interest rate regime on bank profitability. On the one hand it raises demand and thereby adds to bank profits, while on the other hand it lowers net interest margins, especially at the Zero Lower Bound. In this paper we review whether the prior paper by Altavilla, Boucinha and Peydro (2018) on this question for the Eurozone can be generalized to other monetary blocs, i.e. USA and UK. While our findings have some similarity with their earlier work, we are more concerned about the possible negative effects of this regime, not only on bank profitability but also on bank credit extension more widely.

Keywords: Bank profitability; Low interest rates; Net interest margin; Credit extension (search for similar items in EconPapers)
JEL-codes: E52 G18 G21 G28 (search for similar items in EconPapers)
Date: 2019-05
New Economics Papers: this item is included in nep-ban, nep-cba and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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